An updated forecast shows a resurgence of FPSO activity in the years ahead as falling project costs and improving market conditions boost optimism for brighter days ahead.

But don’t expect change to happen overnight.

Stratas Advisors forecast that the sector will add eight vessels in 2018. The additions will fall to only four in 2019, but the turnaround is expected between 2020 and 2023, with each year seeing about 10 more FPSO units put to work.

Currently “there are not really a lot of FPSO projects coming onstream, but after 2019 there might be more,” Stratas Advisors’ Upstream Director Shuqiang Feng said, noting improving market conditions may prompt oil companies to reevaluate stalled projects and proceed with new ones. “The most recent recovery is going to impact those projects coming onstream after 2019 or in 2020.”

However, the typically long development cycle for offshore projects and infrastructure required mean the turnaround won’t occur quickly. A couple of smaller fast-track projects could buck the trend and come online within a year or two; however, that won’t be the norm. “The bigger deepwater developments, especially those requiring newbuild FPSOs, take time—about three or four years,” Feng said.

As for the market leader, Latin America still remains on top led by Petrobras, despite recent economic woes, a corruption scandal and local content issues impacting the pace of some developments.

Brazil’s presalt developments will continue driving investment in Latin America, where the total FPSO vessel count is forecast to jump from 42 to 88. Brazil accounts for most of the new additions, representing 40 of the 46.

Petrobras plans to start up four new production units this year and five in 2018, according to its investment plan for 2017 to 2021. Among the anticipated startups this year are the P-66 at Lula Sul, the FPSO Cidade de Campos dos Goytacazes at Tartaruga Verde e Mestiça and FPSO P-67 at Lula Norte.

The Libra Consortium—which includes Petrobras, Royal Dutch Shell Plc, Total, CNPC and CNOOC—expects to hire an FPSO unit for the Libra Pilot project during 2017 with startup scheduled for second-half 2020, Petrobras has said. In October 2016 the consortium started a new bid process for the FPSO unit after prices came in higher than expected.

Progress also is being made on vessels for projects expected to start in 2018. The hull for FPSO P-69, which will have 18 processing modules and be installed in the Lula Extremo Sul area of the Lula Field, arrived at the Brasfels shipyard in March.

“Brazil is a huge market in terms of the FPSO developments. So far, in Brazil the deepwater presalt developments are using FPSO units. They don’t have a development concept other than FPSOs. So they are batch processing, using a duplicate concept, like the one that will use in Lula,” Feng told SEN. “They have eight of them that are basically the same design. Because of the massive developments they have, this makes the process more concise and efficient.”

The additions are forecast to propel the Latin American region past the Asia-Pacific region in terms of operating FPSO units. However, Petrobras is not expected to add more to its plate as it divests assets to generate much-needed cash.

“I don’t think they will do more than they have planned,” Feng said. “Historically, they have a bigger appetite than they can chew. ... But to expand, I don’t think they are likely to do that. If they can meet their current plans, it will be huge for them.”

But with 48 FPSO units deployed, Asia-Pacific still outnumbers any other region, according to Stratas.

Growth also remains in the forecast offshore West Africa. The region has 37 FPSO units operating, 12 are in the conceptual planning stage and five more are being built.

“Before the downturn started West Africa was a hot spot in terms of offshore deepwater development,” Feng said, noting activity offshore Angola, Nigeria, Congo and Equatorial Guinea. Companies had plans to develop new discoveries in the region, but many projects with hefty cash requirements were shelved because of the downturn. “But with the oil price coming back, they might start looking at that and start to develop.”

Activity offshore Guyana, with ExxonMobil’s success on the Stabroek Block, and offshore the Falkland Islands—where Premier Oil and partners are moving forward with Phase One of the Sea Lion development—are among the frontier areas that will bring FPSO units online in the coming years, he added.

The Gulf of Mexico region, which Feng said lends itself to more deepwater development concepts like tension-leg platforms and spars, may have a couple of FPSO units by 2020. There is currently only one.

In 2015 there were about 140 FPSO units actively employed worldwide. Seven units were added to the global fleet in 2016, and if everything goes according to plans, 13 FPSO units could begin production this year, according to Stratas.

—Velda Addison

Offshore